Correlation Between Perseus Mining and NEXTDC

Can any of the company-specific risk be diversified away by investing in both Perseus Mining and NEXTDC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Perseus Mining and NEXTDC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Perseus Mining Limited and NEXTDC LTD, you can compare the effects of market volatilities on Perseus Mining and NEXTDC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Perseus Mining with a short position of NEXTDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perseus Mining and NEXTDC.

Diversification Opportunities for Perseus Mining and NEXTDC

0.33

Correlation Coefficient

Perseus Mining  NEXTDC

Weak diversification

The 3 months correlation between Perseus and NEXTDC is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and NEXTDC LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTDC LTD and Perseus Mining is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Perseus Mining Limited are associated (or correlated) with NEXTDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXTDC LTD has no effect on the direction of Perseus Mining i.e., Perseus Mining and NEXTDC go up and down completely randomly.

Pair Corralation between Perseus Mining and NEXTDC

Assuming the 90 days horizon Perseus Mining is expected to generate 1.32 times less return on investment than NEXTDC. But when comparing it to its historical volatility, Perseus Mining Limited is 1.51 times less risky than NEXTDC. It trades about 0.27 of its potential returns per unit of risk. NEXTDC LTD is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  900.00  in NEXTDC LTD on October 25, 2024 and sell it today you would earn a total of  85.00  from holding NEXTDC LTD or generate 9.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Perseus Mining Limited  vs.  NEXTDC LTD

Perseus Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perseus Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NEXTDC LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NEXTDC LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NEXTDC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Perseus Mining and NEXTDC

The main advantage of trading using opposite Perseus Mining and NEXTDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perseus Mining position performs unexpectedly, NEXTDC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NEXTDC will offset losses from the drop in NEXTDC's long position.

The idea behind Perseus Mining Limited and NEXTDC LTD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.